NXP Semiconductors (NASDAQ:NXPI) Surprises With Q4 Sales, Guides For Strong Sales Next Quarter

Kayode Omotosho /
2022/01/31 4:24 pm EST
Add to Watchlist

Chip manufacturer NXP Semiconductors (NASDAQ: NXPI) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 21.2% year on year to $3.03 billion. Guidance for next quarter's revenue was $3.1 billion at the midpoint, 4.74% above the average of analyst estimates. NXP Semiconductors made a GAAP profit of $610 million, improving on its profit of $320 million, in the same quarter last year.

Is now the time to buy NXP Semiconductors? Access our full analysis of the earnings results here, it's free.

NXP Semiconductors (NXPI) Q4 FY2021 Highlights:

  • Revenue: $3.03 billion vs analyst estimates of $3 billion (1.19% beat)
  • EPS (GAAP): $2.24
  • Revenue guidance for Q1 2022 is $3.1 billion at the midpoint, above analyst estimates of $2.95 billion
  • Free cash flow of $519 million, down 28.3% from previous quarter
  • Inventory Days Outstanding: 81, down from 84 previous quarter
  • Gross Margin (GAAP): 56.1%, up from 51.3% same quarter last year

“NXP delivered full-year record revenue of $11.06 billion, an increase of 28 percent year-on-year, with demand accelerating across all of our focus end-markets throughout the year. In the fourth quarter, revenue was $3.04 billion, an increase of 21 percent year-on-year, above the mid-point of our guidance range. In review, 2021 was an excellent year for NXP. We experienced significant design win traction across the entire portfolio and especially within the areas of our strategic growth drivers. The engagement and performance of our employees has been truly outstanding, we are extremely proud of their adaptability, dedication and hard work in the face of adversity. We continue to see growing customer demand, outstripping supply, as inventory across all end markets remains very lean. Taken together, this underpins our continued confidence of robust growth throughout 2022,” said Kurt Sievers, NXP President and Chief Executive Officer.

Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.

Sales Growth

NXP Semiconductors's revenue growth over the last three years has been unimpressive, averaging 6.85% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $2.5 billion to $3.03 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

NXP Semiconductors Total Revenue

This was a decent quarter for NXP Semiconductors as revenues grew 21.2%, topping analyst estimates by 1.19%. This marks 6 straight quarters of revenue growth, implying we are mid-cycle for NXP Semiconductors, as a typical upcycle tends to last 8-10 quarters.

NXP Semiconductors believes the growth is set to accelerate, and is guiding for revenue to grow 23.6% YoY next quarter, and Wall St analysts are estimating growth 11.7% over the next twelve months.

There are others doing even better than NXP Semiconductors. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

NXP Semiconductors Inventory Days Outstanding

This quarter, NXP Semiconductors’s inventory days came in at 81, 14 days below the five year average, showing no indication of an excessive inventory buildup at the moment.

Key Takeaways from NXP Semiconductors's Q4 Results

We were very impressed by the strong improvements in NXP Semiconductors’s gross margin this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 2.6% on the results and currently trades at $210.8 per share.

NXP Semiconductors may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.